The studies of chronic candidiasis as a model of defective cell- mediated immunity have been extended. The prediction that clinical and immunological characterizations would serve to identify various classes of patients has been borne out. Furthermore, these studies have facilitated selection of treatment schedules. One mode of therapy, restoration of cell-mediated immunity with transfer factor, is apparently beneficial. However, the mechanism of action of transfer factor and the importance of using donors with positive Candida skin tests has not been established. The pathogenesis of the cutaneous inflammatory lesions in chronic candidiasis has been studied. The results indicate that the inflammatory response is initiated by direct activation of complement by the alternate pathway. An active fraction of dialyzable transfer factor has been isolated. It contains a substance that is thought to be hypoxanthine. The relationship of this material to cellular immunity is under study. Transfer factor also increases monocyte cyclic GMP and may thereby have an antigen independent effect on immunologic inflammation.